The Tory leadership race is dominating the news along with the ‘Red Heat’ warning for the start of next week.
Richard Fuller replaced John Glen as Economic Secretary at HM Treasury on 8 July 2022 and the SDRP team at HM Treasury has advised that this may impact progress on the SDRP consultation where the new minister and the new PM may want to review the draft regulations. HM Treasury continues to encourage firms to contribute to the consultation. Ben Stuart has recommended that any responses be directed to SDRPresponse@hmtreasury.gov.uk.
MoneyHelper – talking to your creditors
Following on from the FCA release around speaking to your creditors or a debt adviser, MaPS has published a webpage with a number of links for consumers.
Ofgem names energy firms who must improve their Direct Debit setting
Debt Camel has produced a summary of some of the Ofgem findings. There is certainly room for improvement around a topic that is central to the cost-of-living crisis and very relevant to some of the SDRP debate around how priority debts are dealt with in the debt solution and more generally.
On 13 July 2022, energy regulator Ofgem told a number of energy suppliers to take immediate and urgent action, after a review found a range of weaknesses or failings in the way they charge customers direct debits.
The review of domestic energy suppliers found that:
- Over 7 m energy consumers on a Standard Variable Tariff (SVT) saw an increase in their direct debit between February and April 2022
- On average, direct debit levels for customers on an SVT increased by 62% in this period. Most of this reflects the increased cost of gas
- 8% of SVT customers seeing an increase (around 500,000 households) experienced an increase of more than 100% and Ofgem is concerned by this and wants to ensure there is good reason for it (e.g. coming off an SVT, increase in energy use)
- Evidence that some suppliers’ processes are not as robust as they could be, and that this could lead to inconsistent, incorrect or poor treatment for customers
- A lack of formally documented policies and processes within some suppliers, which risks inconsistent and poor consumer outcomes
Suppliers that had moderate to severe weaknesses were identified. This group includes Ecotricity, Good Energy, Green Energy UK and Utilita Energy.
FCA tells banks to improve treatment of struggling small business borrowers
Following on from their ‘Dear CEO’ letters, the FCA has now issued a warning to lenders around the treatment of small and micro firms during the cost-of-living crisis.
A review of 11 bank’s collection practices identified a number of issues, including:
- Lenders not treating small businesses fairly when they try to agree a sustainable payment plan – for example, arranging payment plans which are clearly unaffordable based on the information provided by the customer
- Staff not having the right training to provide effective support to customers and make fair decisions about cases
- Lenders not having clear policies to help staff identify and support vulnerable customers – meaning these customers may be missing out on the support they need
- Not having quality assurance (QA) and testing for their processes to ensure that they deliver fair results for consumers – this can mean problems going undetected
This is important with regard to sole traders and micro firms where they behave more like consumers. Accessing quality data to make affordability and vulnerability assessments can sometimes be more difficult for debt advisers and insolvency practitioners. Use of open banking can be more complex and credit reporting in the unincorporated space is still fairly poor. We haven’t really scratched the surface of the applicability of SDRPs for this market segment.
The ‘Dear Chair’ letter (attached) from 12 July makes specific references to CONC 7 where firms should be able to demonstrate forbearance and due consideration are being offered in accordance with CONC 7.3.4 R (where it applies). Where CONC 7.2.1R applies, the firm must establish and implement clear, effective and appropriate policies and procedures for the fair and appropriate treatment of customers, who the firm understands, or reasonably suspects, to be vulnerable.
UK tech talent shortage threatens to stifle growth in the industry
This is now becoming more evident for firms, notably those in the FinTech space. This may become an increasing risk to maintaining aggressive growth targets and investing in innovation and R & D. This has seen more focus on ‘low code/no code’ platforms where different types of resources can be deployed and we have seen this increasingly with CRM platforms like Salesforce. Many firms can now relate to backlogs where resource availability is impacting the agility of their firm, especially where there are major regulatory changes requiring concurrent product development with imposed changes by the regulators. Indeed, the top-2 factors rated at the FCA Innovation day on 13 July was regulatory uncertainty and tech debt/legacy systems in terms of factors slowing down innovation. I am hoping the various surveys will be published by the FCA.
SDRP consultation progress
DEMSA attended the second workshop on 12 July 2022 as we worked through some of the primary discussion points tabled by HM Treasury. I have attached the questions raised. The slides haven’t been circulated yet. HM treasury made early reference to the new minister (Richard Fuller) and the change in PM. This may impact the timetable for laying the new regulations down and then have a knock-on impact on the wider timetable originally presented at the open event on 21/6/2022.
I also attended the Arum/Just public sector event held around the SDRP consultation and chaired by Steve Coppard on 11 July 2022. Steve provided plenty of opportunities for Seb McCullough (FWG), John Fairhurst (PayPlan) and myself to contribute. There were a number of local authorities on this call. Seb and John also attended the private sector event on 12 July along with other debt solution providers.
I supported the IPA SERL committee on 15 July 2022, where they have further meetings and data gathering before the final meeting in early August 2022. The consultation deadline is 5 August 2022 and HM Treasury continues to encourage submissions and I have distributed some of the more substantive questions that would like answers to around refining the impact assessment.
Some of the ‘hot topics’:
- Should there be a different process if someone has been through a Standard Breathing Space before starting an SDRP
- The eligibility criteria and foreseeable events that may cause an SDRP to be revoked seem to exclude many consumers relative to the current DMP population
- The in-year and variation administration seem overly burdensome and costly, with insufficient flexibility in changes in disposable income relative to a DMP and an IVA
- Distributing net and reporting gross will cause many problems for creditors in both the private and public sector
- Credit reporting implications are still not well defined and are a key consumer issue reflected in the FCA release and Yonder survey results
- The recoverable administration costs make this unattractive to free-to-consumer and commercial debt solution providers that can hold client money
- The role of the debt adviser where a consumer wants to take out more credit (type of credit to be determined) and in the revocation process
- The role of the regulated debt adviser relative to FCA obligations and obligations under the SDRP regulations – UK Finance has sought clarity on governance/oversight at both meetings on 5th and 12th July – limited visible FCA engagement to-date
- Is 18 months sufficient to implement from regulations being laid down, notably with the current complexity and role of The Insolvency Service
The ‘deep dive’ on the 20 July will undoubtedly look at anticipated volumes of cases and the proportion of debt advice sessions where an SDRP is likely to feature. Early indications are that this will be a very low proportion of cases and this may vary by portfolio.
Modernising consumer protection: The case for reforming & updating the Consumer Credit Act
The Credit Services Association (CSA) has cautiously welcomed the Government’s recent announcement of their intention to reform and modernise the Consumer Credit Act. The CSA report draws attention to the mismatch between the requirements of the existing legislation and the needs of modern society and business. This is another activity that is likely to be impacted by the change in the HM Treasury minister. This requires close alignment with the introduction of the FCA Consumer Duty and bringing BNPL under the FCA supervision. Indeed, there are many concurrent activities impacting consumer credit firms that need to be taken account of, including the introduction of SDRPs and some of implications of this (e.g. credit reporting).
Report author Henry Aitchison, Head of Policy at the CSA, said:
“It is important that we move away from the current approach of treating all customers identically and simply grafting antiquated requirements blindly onto new iterations of regulation.
“It has been widely recognised for many years now that some post-contractual information requirements never provided the information or accuracy that consumers actually need, while at the same time managing to undermine businesses’ attempts to work with their customers. Slapping a bandage on already faulty requirements by suggesting yet more paperwork to explain failing regulations isn’t going to cut it, if we are serious about the Consumer Duty.”
There is definitely a case for more ‘joined up’ thinking and better collaboration on a number of fronts whilst the Credit Information Market Study is also ongoing.
This has picked up a little bit of traction on LinkedIn and I have had follow-up dialogue with Henry.
June 2022 – Insolvency Statistics
The number of registered company insolvencies in England & Wales for June 2022 was 1,691, which was 40% higher than the 1,207 in June 2021). This was largely made up of 1,456 Creditors’ Voluntary Liquidations (CVLs), 30% higher than in June 2021 and 44% higher than June 2019. Numbers for other types of company insolvencies, such as compulsory liquidations, remained lower than before the pandemic.
There were 76 company insolvencies registered in Scotland, equal to the number in June 2021 but 12% higher than in June 2019. This was comprised of 8 compulsory liquidations, 67 CVLs, and one administration. There were no CVAs or receivership appointments.
There were 26 company insolvencies registered in Northern Ireland, 2.4 times as many as in June 2021, but 10% lower than June 2019. This was comprised of 11 compulsory liquidations, 12 CVLs, one administration and two CVAs. There were no receivership appointments.
There were 1,815 DROs in June 2022, which was 28% higher than in June 2021 but 14% lower than the pre-pandemic comparison month (June 2019). 471 bankruptcies were registered, which was 37% lower than in June 2021 and 64% lower than June 2019. In the 12 months since the change in DRO eligibility criteria, an estimated 8,628 individuals have had a DRO approved who would not have previously been eligible.
There were, on average, 7,575 IVAs registered per month in the three-month period ending June 2022, which is 6% higher than the three-month period ending June 2021, and 17% higher than the three-month period ending June 2019. IVA numbers have ranged from around 6,300 to 7,800 per month over the past year.
There were 134 individual insolvencies in Northern Ireland, 18% lower than in June 2021, and 30% lower than June 2019. This consisted of 101 IVAs, 17 DROs and 16 bankruptcies.
There were 5,772 Breathing Space registrations in June 2022, which is 2% higher than the number registered in June 2021. 5,687 were Standard breathing space registrations, which is 2% higher than in June 2021, and 85 were Mental Health breathing space registrations, which is 35% higher than the number in June 2021.
As previously advertised, Lee Usher of Trustfolio has now published its interview with James Jones of Experian. It has received a few likes so far.
The FCA Innovation Day on 13 July 2022 was well attended and covered some very useful content in terms of the FCA’s future ambitions…
The Collaboration Network face-to-face event seemed to go well in London last week. I have seen a number of photos posted by Carolyn Delaney, Mark Bailey and Will Archer.
I believe a number attended the MALG event .
I am presenting on progress on the Debt Respite Scheme and Statutory Debt Repayment Plans (SDRPs) at the Enforcement Law Review Group at the House of Lords on 18 July 2022.
I am also attending the virtual Vulnerability Summit 2022 on Thursday 21 July 2022 being run by the Collaboration Network.
BSI webinar on consumer vulnerability (ISO 22458) – 26 July 2022
Join me at the webinar focusing on the BSI Kitemark for Financial Services and the benefits it can bring to your firm, your stakeholders and your customers.
Led by Natasha Bambridge, the agenda will cover:
- An overview of ISO 22458: Consumer Vulnerability and how it underpins the FCA drive to Treat vulnerable customers fairly
- Overview of the BSI Kitemark Inclusive Service for financial services and how this will benefit regulated firms
- A deep dive into BSI’s approach for testing outcomes and MI aligning to:
- FCA FG21/1 Guidance for firms on the fair treatment of vulnerable customers
- The new FCA Consumer duty
- How you can be part of the shaping group who are first to achieve the Kitemark
Register your place https://attendee.gotowebinar.com/register/6346333160916310540
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